TMI Blog2022 (8) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the post-GST period (July-2017 to October-2020), it was 9.88% for the project Laxmi Apartment's . This confirm that, post-GST the Respondent has been benefited from additional ITC to the tune of 8.27% [9.88% (-) 1.61%] of his turnover for the said project and the same was required to be passed on to the customer/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,33,70,091/- (which includes an amount of Rs. 57,557/- in relation to Applicant No 1) for the project Laxmi Apartment . The Authority finds no reason to differ from the above detailed computation of profiteered amount by the DGAP or the methodology adopted by it. The Authority finds that the Respondent has profiteered an amount of Rs. 6,33,70,091/- (Rupees Six Crore Thirty Three Lacs Seventy Thousand Ninety One only) during the period under present investigation. This includes an amount of Rs. 57,577/- in relation to Applicant No 1. Therefore given the above facts, the Authority under Rule 133(3)(a) of the CGST Rules orders that the Respondent shall reduce the price to be realized from the customers/flat buyers/recipients c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTC benefit amounting to Rs. 1,55,06,800/- on amount of profiteering for the period from July 2017 to June 2019, Therefore, he is also liable to pass on interest @18% on the profiteered amount to the flat buyers from the dated from which he has received the additional amount of consideration from them till the passing on of the ITC benefit, as he his used this amount in business as per the provisions of section 171(1) of the CGST Act, 2017 read with rule 133 (b) of the above Rules. The DGAP is directed to investigate, compute and ensure that the applicant interest is also paid to all eligible housebuyers. c. The difference in the turnover of the Respondent for the period from April 2016 to June 2017, adopted in the DGAP Report and the Statutory Returns filed by him during the above needs to be reconciled and explained with proper supporting documents. d. Similarly, the difference in the turnover of the Respondent for the period from July 2017 to June 2019, adopted in the DGAP's Report and Statutory Returns filed by him during the above period needs to be reconciled and explained with proper supporting documents. e. Further, the claim of the Respondent that he has av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent is reproduced below. (a) He was executing multiple projects under the same Service Tax No. /Vat No. and the same GSTIN. The turnover declared is statutory returns includes the turnover of other projects as well, therefore there was a difference in turnover in pre and post-GST (b) He had passed on the credit of the ITC to the buyers in November 2018 and no interest was paid along with it. (c) He had applied for Occupation Certificate with the respective authority. (d) The project Laxmi Apartments under investigation is an Affordable Housing project, which was exempt from payment of Tax and the Respondent was not charging any Service Tax on the same Further the Respondent had not claimed any Service Tax Input Credit on any Service. (e) Since the project was excerpt from payment of Service Tax a similar exemption was available to the 'Contractors and he too was not liable to payment of Service Tax. (f) He was liable to pay VAT and there was an option available with the Respondent to pay VAI under the Compounding Scheme @ 1% for the Builders effective form April 2014 or the VAT based on the Calculation of the cost of Material Transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the items on which it was earlier getting ITC or charging tax. The Respondent stated that he would not get any benefit from the Input Tax paid to the Contractor. (ii) The alternate method to calculate the benefit to the Respondent post-GST. Respondent stated that he had passed on a 3% GST benefit to the Customers calculated on the payment due from the Customers after 1-7-2017 amounting to Rs. 1,59,35,584/-. The percentage had been estimated based on the expected benefit, the Respondent would receive on the reduction in the Cost of the Contractors post-GST. An approximate cost of 50% is incurred on the payments to the Contractors. The Respondent had renegotiated a reduction of 7% in the Contactors Bills post-GST. The effective reduction in the Cost to the Respondent was estimated by him as below: Particulars Pre-GST Post-GST Increase in Profit Post-GST Revenue from Project 100 100 Project Cost Land Cost 25 25 Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST available to him. In this regard, it is observed that in the erstwhile tax r gime (pre-GST), various taxes and cases were being levied by the Central Government and the State Governments, which got subsumed in the GST, Out of these taxes, the ITC (ITC) of some taxes was not allowed in the erstwhile tax regime. In the case of constraction service, while the ITC of Service Tax was available. The ITC of Central Excise duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile supplied, resulting in increased price. With the introduction of GST w.e.f. 1-7-2017, all these taxes got submitted in the GST and ITC of GST is available in respect of all goods and service unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to cases input taxes, the credit of which was not allowed in the pre-GST regime but is allowed in the GST regime. This additional benefit of ITC in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of section 171 of CGST Act, 2017. In the present case, it is observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of the ITC availed by them. His turnover from the project Laxmi Apartments and the ratio of ITC to turnover, during the pre-GST (April 2016 to June 2017) and post-GST (July 2017 to October 2020) periods was furnished in table-A below. Table-A (Amounts in Rs.) Sl. No. Particulars Total April-16 to June 17 1-7-2017 to 24-l-2018 25-1-2018 to 31-10-2020 Total Post-GST 1 CENVAT credit of Service Tax Paid Input Services (A) - 2 Input Tax Credit of VAT paid on Inputs (B) 1,07,07,174 - 3 Input Tax Credit of GST Availed (C) 1,47,94,711,83 5,66,97,319.21 7,14,92,034,04 4 Total CENVAT Input Tax Credit Available D=(A+B+C) 1,07,07,174 1,47,94,714,83 5,66,97,310,21 7,14,92,03.00 5 Total Turnover as per h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering had been examined in two parts, i.e. by comparing the applicable tax rate and ITC available in the pre-GST period (April 2016 to June 2017) when only VAT was payable with (I) the post-GST period from 1-7-2017 to 24-1-2018, when the effective GST rate was 12% and (2) with the GST period from 25-1-2018 to 31-10-2020, when the effective GST rate was 8% for residential flats. Accordingly, based on the figures contained in table- A above, the comparative figures of the ratio of ITC availed/available to the turnover in pre-GST and post-GST periods us well as the turnover the recalibrated base price and the excess realization (profiteering) during the post-GST period was tabulated in table-B below; Table-B (Amount in Rs.) Sr. No. Particulars 1 Period A 1-7-2017 to 24-1-2018 25-1-2018 to 31-10-2020 Total 2 Output GST rate (%) B 12 8 - 3 The ratio of ITC to Turnover post-GST as per table (%) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12% GST on the basic amount of Rs. 2,01,97,959/-. Further, the amount of benefit of ITC that needed to be passed on by the Respondent to the homebuyers during the period 25-1-2018 to 31-10-2020, come to Rs. 4,07,48,377/- which included 8% GST on the base amount of Rs. 3,77,29,979/-. Therefore, the total benefit of ITC that the Respondent needed to be passed on to the homebuyers for the period 1-7-2017 to 31-10-2020, comes to Rs. 6,33,70,091/- which included GST @ 12% or 8% on base amount of Rs. 5,79,27,938/-. This amount was inclusive of the profiteered amount of Rs. 57,557/- in respect of the Applicant in the matter. XIII. Further, it was observed that at the time of the first investigation there were 9 Towers in the project Laxmi Apartments having 804 units. However, during the current investigation, the Respondent had submitted that he had got the approval of Tower 10 also having 33 units. Therefore, in the current investigation total number of units had increased from 804 to 837, and accordingly, the total saleable area of the project had increased from 4,33,504 sq.ft to 4,58,024,32 sq.ft. Out of these 837 units, 820 units were sold and 17 were unsold. Out of 820 sold unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Table-C (Amount in Rs.) Sr. No. Category of Customer No. of Units Profiteered Amount (as per new computation) Benefit claimed to have been passed on by the noticee Benefit passed on and duly verified Difference (Profiteered and duly verified) Remarks A B C D E F G D-F H 1 Applicant 1 57,557 19,680 19,680 37,872 Receipt confirmed by Applicant through e-mail. The respondent is still required to pass on the different amount 2 Other than Applicant 5 2,95,341 1,00,984 1,00,984 1,94,357 Receipt confirmed by the buyers through email. the respondent is still required to pass on the different amount 3 Other than Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,20,800 0 1,55,710 Unit No. 903 was ex-booked in Feb 2020 by a new buyers. Hence in the basic buyers 9 Other than Applicant 1 58,391 45,300 0 58,391 No profiteering amount was computed carried. Hence in the was sent to the new basic buyers 10. Other than Applicant 768 5,77,95,014 2,26,58,875 0 5,77,95,014 Mails/letters were sent 20-70 buyers only as identified In the NAA Sub Total V=7+8+9 750 5,80,09,115 2,28,24,975 0 5,80,09,115 All the buyers to within to email/letters were sent, Total VI=IV+V 820 6,33,70,091 2,42,38,751 1,41,636 6,32,28,455 - Unsold unit 17 0 0 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Statutory returns include the turnover of all the other project including Laxmi Apartments. (e) In respect of VAT Credit of Rs. 1,07,07,174/-, the Respondent had submitted the copies of Assessment Order under Haryana VAT Act, 2003, for 2016-17 and April 2017 to June 2017. As per these orders, the Respondent has been allowed ITC of VAT of Rs. 1,82,97,736/- and Rs. 46,85,002/- for 2016-17 and April 2017 to June 2017 respectively. Out of the total VAT Credit of Rs. 2,29,82,738/- for the pre-GST period from 1-4-2016 to 30-6-2017, the Respondent had claimed ITC of VAT of Rs. 1,07,07,174/- in respect of project Laxmi Apartments. Because of the said Assessment Orders under Haryana VAT Act, 2003, it is submitted that the Respondent is eligible to claim the ITC of VAT in the pre-GST regime. XVII. Based on the details of outward supplies of the construction service submitted by the Respondent, it was observed that the service had been supplied in the State of Haryana only. XIX. Basic on aforesaid discussions and finding it is concluded that in the initial investigation Report dated 25-3-2020, the profiteered amount was computed as Rs. 1,39,41,309/- in respect of 770 homebuye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the provisions of section 171 should not be fixed. The Respondent was directed to file written submissions which had been filed on 21-4-2022, wherein the Respondent had submitted the following points:- 1. BRIEF FACTS OF THE CASE 1.1 The company is in the business of construction of residential buildings and Laxmi Apartments (relevant to the present notice) is one of the real estate project being undertaken by the company. 1.2 Laxmi Apartments is an affordable housing project covered under the Affordable Housing Policy 2013, of the State of Haryana. 1.3 The said Affordable Housing Policy provides detailed guidelines on various aspects of projects including but not limited to; a. Fixation of Price of the flats; and b. Due date of instalments 1.4 The project Laxmi Apartment is divided into two parts as follows; First Part Tower 1 to 9 Second Part Tower 10 2. Taxability of The project Laxmi Apartment 2.1 Pre-GST Taxability 2.2.1 Service Tax In the pre-GST period, the project was exempted from Service Tax in terms of Notification No. 25/2012 dated 20th June 2012. Further, even the sub-contractors providing services to the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utput tax rather after the implementation of GST the rate of tax had increased to 8%. 3.1.2 The DGAP had failed to appreciate the meaning of profiteering in the context of sec 171 of the GST Act and had blindly taken the entire amount of ITC as benefit of input tax credit and had used the same for calculation of profiteered amount. Therefore, the report of DGAP cannot be accepted as it is not in line with the expectations of sec 171 of the GST Act, read with rule 126 of the GST rule. 3.2 Using the methodology of ITC to turnover 3.2.1 The project under consideration in the instant was commenced on 22nd March 2016 of which Occupation Certificate (completion certificate) for the First Part of the Project (Towers 1 to 9) was received on 9th July, 2021, which is almost five years and four months and as regards the Second Part of the Project (Tower 10) the actual construction started after July, 2021 and even as on date the second part of the project is not even 50% complete. 3.2.2 The time span of the real estate project therefore, requires due considerations, Further even the value of inward supplies (expenses) was independent of each other and do not have any correlati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 2 of the Project commenced after July, 2021. The company had therefore analyzed the two parts of the project independently. 3.7 Further, the company after introduction of GST had passed on the benefit of GST by waiving of the contract price in the following manners to its customers: Sl. No. Particulars Benefit passed on 1 Flats booked up to 31st March, 2019 3% of the Total demand to be raised after 1st July, 2017. 2 Flats booked up to 1st April, 2019 6.18% of the Total demand to be raised The summary of benefit passed on or to be passed on at the time of issuance of demand is as follows: Sl. No. Particulars Benefit passed on 1 Part 1 of the Project (Towers 1 to 9) Rs. 2,06,88,785/- 2 Part 2 of the Project (Tower 10) Rs. 37,18,880/- Total Rs. 2,44,07,665/- 3.8 Since Part-1 the proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,629,38 31,53,157,58 Total 7,50,89,597,63 4,64,563,88 7,46,25,033,75 3.11 From the four categories as provided in column B of table above, the company is not getting the benefit of input tax credit as explained above for the following categories namely: Category Effective ITC Remarks Subcontractor 42836333.62 Prior to the implementation of GST, no taxes were charged by the subcontractor and therefore there was no outflow of the company and accordingly no question of ITC. However, post-GST the sub-contractors were liable to charge GST from the company and the company was getting credit for the same, The said credit is not a benefit to the company rather is only a tax natural transaction where the company first pays tax and then gets it back as ITC Cement Steel 24902737.18 Prior to implementation of GST the company was getting ITC of cement and steel and even after implementation of GST the company is getting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the company is very nominal which is required to up the inflation cost over the five years of the project including contingencies and additional costs arising due to delays of Covid-19 pandemic. 3.15 As regards Part-2 of the Project (Tower-10) it is stated that the: (a) The effecitive GST rate is 8% of which 6.84% is already provided as benefit. The said amount is much more than percentage of profiteered amount calculated for Project (Towers 1 to 9) of the Project. (b) The aspect of reduction of rate of inward supplies also does not apply for Part 2 of the project as the prices of cement and steel had increased multifold when compared to 2017. Basis above there cannot be any profiteering in Part 2 of the project. Further it is again reiterated than Part 2 of the Project is outside the scope of current notice and cannot be included in the same merely because of receipt of booking amount. 5. Copy of the above submissions dated 21-4-2022, filed by the respondent were supplied to the DGAP for supplementary Report under rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarification on the Respondent's submissions vide their supplementary Report dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f GST on the amount/payments collected/received from the customers/buyers. Therefore, it is amply clear that the ITC which is related to inputs and taxable turnover which is related to outputs (payments of GST on amounts collected) was mutually dependent on each other. Hence it is incorrected to say that in Real Estate Sector, there is no correlation of inward supplies (expense) and the outward supplies (receipts). Further, it is pertinent to mention here that the additional benefit of the ITC accrued at any given point of time is associated with the whole project whereas the benefit of ITC required to be passed on in terms of section 171 would be computed on proportions with the case sold and the actual amount to be passed on to each home could only be determined by factoring the demand raised from the buyers or advance received from them. Thus, the turnover considered for the computation of the profiteering pertains to the sold unit only in the project. Whereas the total ITC availed pertains to the entire project of the Noticee. The ratio of the ITC to the taxable turnover is computed to being in picture the buyers from whom demands were raised or advance were received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the ITC availed and the consequential profiteering. if any, had to be determined at a given point of time and such determination cannot be deferred till the completion of the project. Hence, the investigation was done up to 30-6-2019 and investigation report was submitted to the NAA on 25-3-2020. However, the NAA referred back the matter under rule 133 (4) of the CGST Rules. 2017 and specifically directed the DGAP to further investigate the matter up to 31-10-2020. According further investigation in the mutter was carried out for the period from 1-7-2017 to 31-10-2020. Furthermore, to address the contention of the Respondent, a reasonably long period of 15 months in pre-GST period and 40 months in post-GST periods had been considered to compute the profiteering. Moreover, the ITC taken into consideration is proportionate with the area sold in respective periods. Therefore, the periods taken in pre-and post-GST were justifiable and were within the confines of the law. iv. The Respondent has alleged that DGAP has used wrong rate of tax in the calculation of profiteered amount. The averment made by the Respondent is factually incorrect. In this regard it is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent in terms of section 171 of the CGST Act. 2017. In fact, the subcontractor's cost must have decreased as against the claim of the Respondent of having subcontractor's cost being increased. Further, by paying more taxes on inputs and inputs services, if any, in GST regime, the Respondent becomes eligible for more ITC in GST regime however, the rate of tax on outward supplies had also increased as compared to pre-GST regime. Hence this increased rate of GST is being charged by the Respondent from his customers/buyers. Therefore, at the time discharging of his tax liabilities the Respondent avails the additional ITC which had been increased in GST regime. Hence the Respondent was not required to pay even a single penny from his own pocket. Therefore, the methodology on the basis of the cost adopted by the Respondent in this regard cannot be accepted as it is not based on correct interpretation of the above provisions of section 171. However, cost of materials mentioned by the Respondent does not give an exact quantum of additional ITC benefit. The increase or decrease in costing/pricing had got nothing to do with the increase/decrease in rate of tax and availability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form practice of limiting the scope of investigation only that project (on the basis of RERA registration) in respect which the anti-profiteering application had been filed and for which the direction to investigate had been given by the Standing Committee. However, the scope of investigation covers all other recipients in that project. besides the Applicant. Hence, the contestation of the Respondent in this regard is not considered and investigation is carried out for both the parts of the project. Further, the averment made by the Respondent; that the completion certificate for the first part was received by the Respondent in July, 2021 is factually incorrect or if it is so, then the Respondent had suppressed the facts before DGAP. In this regard it is submitted that during further investigation in this case, the Respondent was asked for completion certificate of the project However, the Respondent submitted before the DGAP that he had applied for the same. The Respondent submitted various documents/information during further investigation in the case and his last reply submitted before the DGAP was on 17-11-2021. If the Respondent had already received the competition certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere liable to pay GST. However, as stated above that in case of construction service, while the ITC of Service Tax was. available, the ITC of Central Excise duty paid on inputs was not available to the service provider. Such input taxes the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased cost. With the introduction of GST with effect from 1-7-2017, all these taxes got subsumed in the GST and the ITC of GST became available in respect of all goods and services, unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime, but allowed in the GST regime. This additional benefit of ITC in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of section 171 of GST Act, 2017. Therefore, on implementation of GST, the subcontractors also benefitted with the additional ITC and in terms of section 171 of the CGST Act, 2017, the benefit of additional ITC is required to be passed on by every suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en supported with any documentary evident and nor could be verified by the DGAP, Hence same is not tenable. Further, the profiteered amount of Rs. 37,32,805/- as arrived by the Respondent is only an assumption that had got noting to do with the actual profiteering computed by the DGAP. xiii. The benefit of additional ITC available to the Respondent in post-GST regime under all the categories mentioned by the Respondent squarely falls within the ambit section 171 of the CGST Act, 2017. Therefore, the investigation carried out by the DGAP and report submitted on its findings are correct and within the scope of section 171 of the CGST Act, 2017, and rules made thereunder. xiv. with regards to contention of the Respondent regarding passing on the benefit with respect to Tower 10 it is to submit that during the course of further investigation of the case, the Respondent did not make such submissions before the DGAP that he had passed on the benefit of ITC to the buyers of Part 2 i.e. Tower 10 of the project. Moreover, now also the Respondent failed to produce any documentary evidence, in support of his claim the benefit @9.84% had been passed on by him to the buyers of Tower 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 Commencement of construction Tower 10 July 2021 Further since, Tower-10 to did not exist before implementation of GST the profiteering provisions were not applicable and the same is already held by this Hon'ble Authority in the following cases: a. Devroop Guha v. Signature Global (India) (P.) Ltd. b. Director General of Anti-Profiteering v. Alton Buildtech India (P.) Ltd. c. Darshan Joshi v. Lodha Developers Ltd. Though, the anti-profiteering provisions did not apply to the company it had itself reduced the price of the flats by 6.84% of the Total amount received and receivable from the buyers. Dispute 2; Considering the entire amount of ITC as benefit of ITC DGAP had failed to distinguish between the two terms ITC and Benefit of Input Tax Credit In this regard it is reiterated that, the objective of sec. 171 is to identify the benefit of ITC and not use a short-cut of using the entire ITC, therefore the ideal working would have been to classify the input tax credits availed by the company in the following categories: Category Remarks ITC available PRE-GST and POST-GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC), however, not all the amount due from the flat buyers is received i.e. going forward there be no inward supply but the company would have outward supply on account of balance instalments. c. When the company stated the project then some flats were booked, however, the construction of the entire project was undertaken i.e. cement, steel and subcontractor services were being procured for the project as a whole and not for only those who people who had booked the flat. d. Further, since the project is an affordable housing project the installing get due on the basis of no of days and is not linked with even the construction of the project therefore even there is no construction in a period the outward supply might be there and there could be situation wherein there is no outward supply but there is huge flow of inward supply- Further, the Notification No. 3/2019 Central Tax Rate dated 26th March, 2019, which had stipulated percentage completion method for calculation of ITC allowance during the change in tax rate structure real estate projects. This was again required since the inward supplies and outward supplies in a particular tax period do not match with one another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to its suppliers/vendors and thereafter it gets credits so its does not come for free. The benefit is when the company was paying a tax amount which was earlier not creditable, therefore becoming a cost but is eligible post-GST, thereby reducing the cost. However, no step had been undertaken by the DGAP to calculate the benefit rather a flimsy method lacking in all parameters had been used to calculate the profit amount. The Respondent had submitted that the Authority had similar view in the case of Sumit Marsinghka v. E-Homes Infrastructure (P.) Ltd.. Dispute 6; Amount of Benefit passed by the company The company had stated that the total benefit that would be passed on by it for the entire project is Rs. 2.44 cr i.e. for both the parts and the relevant period would he from 1st July, 2017 to 31st Oct, 2020 and therefore the two values would not match. The company at various places had categorically specified that he was submitted values for the entire project since Part 1 of the project is completed and the second part of the project is outside the purview of sec 171 but for the DGAP these were irrelevant facts and required on consideration. As regards the evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the company's submission. The company offers similar explanation for other goods as is given for Cement and Steel. Dispute 9: Profiteered amount calculated by the company The company reiterated that the DGAP had not appreciated the issue being discussed in the relevant paragraph. The DGAP had compared the ITC amount and since the figures in two tables were not same, the submission of company is contradictory. The DGAP could not realize had the company accepted the entire ITC as benefit of ITC then there was no need for the submission since the company is of the firm belief that sec. 171 does not talk about entire ITC and but only benefit of ITC therefore the two figures could not be same. The DGAP had failed to appreciate that company had wilfully come forward to calculate the profiteered amount for the entire period of the project and not restrict it to Oct, 2020. Further, the company had accepted wherever the entire tax was earlier becoming cost but was eligible as credit in GST (Other services) and classified it as benefit of input tax credit. The company had also considered the benefit of cost reduction in case of works contractor and cement steel which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Orders passed by the NAA in three cases and had claimed that in these cases, the issue was similar wherein NAA had held same as contested by Respondent here. In this regard, the clarifications on each case were submitted as under: a. Devroop Guha v. Signature Global (India) (P.) Ltd. [2021] 124 taxmann.com 493 (NAA) In this case the project was started in the post-GST regime and therefore, the DGAP submitted Nil report which was upheld by the NAA on the grounds mentioned in Para 21 of the aforesaid order wherein the NAA observed that on the basis of the sequence of the above events it could safely concluded that the above project had been stted after coming into force of GST w.e.f. 1-7-2017 and further observed that since there is no basis for comparison of ITC available before and after 1-7-2017, the Respondent was not required to recalibrate the prices of flat due to availability of additional benefit of ITC. Hence, it is amply clear that in this case, since the entire project was launched in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence same is not applicable to the Respondent's pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was upheld by the NAA on the grounds mentioned in Para 15 of the aforesaid order and therefore vide Para 17 of the Order the NAA agreed with the findings of the DGAP. Therefore on the basis of above submissions the cases quoted by the Respondent in support of his claim were not applicable in the instant case and hence the hence the claim of the Respondent is not tenable. Moreover, it is pertinent to mention here that Tower-10 of the project 'Laxmi Apartment's of the Respondent is located in the same premises of the project for which no separate accounting of ITC is maintained by the Noticee. Therefore the inputs and inputs services intended/meant for Tower 1 to Tower 9 could be used for Tower 10 and also the ITC available in respect of Tower 10 only might have been availed at the time of discharging his tax liability i.r.o. of Tower 1 to Tower 9 or vice versa, Therefore, investigation carried out by the DGAP considering Tower 10 also is correct and quite justifiable and hence same is within the confines of law and practice followed. Furthermore, it is pertinent to mention here that the Respondent is contesting that since the Tower-10 was launched in post-GST regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that since the Respondent's project Laxmi Apartment is under affordable housing scheme of Haryana, in pre-GST regime, the Respondent and his subcontractors were not liable to pay service tax and hence both were exempted. However, after implementation of GST, both were liable to pay GST. Now if the contention of the Respondent is correct, then same is applicable in case of his subcontractor also. However, it is a matter of fact that the Respondent renegotiated with his subcontractors and got reduction of 7% in the Constructors Bills post-GST. Therefore, in the similar situation (category 3 of the table), the Respondent is availing benefit of ITC from his subcontractors but in his own case, the Respondent is claiming that he is paying tax and thereafter taking credit and asserting same as tax neutral transaction. In fact, the GST paid on output is being borne by the homebuyers only. GST paid on inputs is being taken as ITC of GST. It appears that the Respondent is taking the benefit of ITC from all possible of ITC of GST to his customers/recipients. Dispute 3: Methodology adopted by DGAP of comparing ITC to Total Turnover The contention of the Respondent is not tenable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this methodology of DGAP had been consistent throughout in all its reports. The same had been upheld by the NAA in the similarly placed cases. Dispute 4: Rate of Output Tax The averment made by the Respondent is incorrect in its entirety. In the regard it is submitted that primarily, Sl. No. 3(v)(d) of the said Notification No. 20/2017, dated 22-8-2017 is not at all applicable to the Noticee. The said Sl. No. 3(v)(d) is applicable to the Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017 . The Respondent is supplying Construction Service to his recipients/homebuyers and is not supplying the Works Contract Service . Therefore, the said Notification is applicable to the Respondent's subcontractors only who were supplying Works Contract Service to the Respondent as defined in clause (119) of section 2 of the CGST Act, 2017. Further, the applicable tax rate specified against the Sl. No. 3(v)(d) under column (4) of the table of the aforesaid Notification is 6% which is for the Central GST and similarly it is 6% for State GST as specified in similar Notification issued by the State Government (Haryana). Therefore, the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on in teams of section 171 of the CGST Act, 2017 and hence the contention of the Respondent is not tenable. Dispute 7: Amount of ITC Respondent in his submission had tabulated the ITC available to him in respect of Part of the project i.e., Tower 9, which pertains to the period from 1-7-2017 to 31-7-2021 whereas the DGAP had considered the period from 1-7-2017 to 31-10-2020 and therefore the amount of ITC in DGAP's report is less than the amount of ITC claimed by the Respondent. In this context, it is pertinent to mention here that vide DGAP's Investigation Report, it was reported that the Respondent had not received Occupation Certificate and therefore profiteering, if any for the period post-October, 2020 was not examined as the exact quantum of ITC than would be available to the Respondent in future could not be determined at that stage, when the construction of the project was not completed. Accordingly, it was recommended in the report that in respect of the units/homebuyers in whose case agreement had been made prior to the receipt of Occupancy Certificate and where balance amount is yet to be demanded, the NAA might direct the Respondent to work out the el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal hearing. The Respondent has requested that his earlier given written submission in the matter may be considered. 9. The Authority after careful consideration of the all DGAP Reports and all of the Respondent's submissions finds as under :- I The Respondent has claimed that project Laxmi Apartments had two separate parts i.e. Tower 1 to 9 being the First Part and Tower 10 being the Second Part. The Authority finds that the project was launched in pre-GST regime and the Respondent had obtained single RERA registration for the entire project. Since for the both the parts i.e., Tower 1 to Tower 9 and Twer-10 there was single RERA registration the second part i.e., Tower-10 cannot be spared from the current investigation on the mere basis that the construction of same commenced in July, 2021. Section 171(1) of the CGST Act, 2017 is very clear which states that any reduction in the rate of tax or the benefit of ITC had been passed on to the recipient by way of commensurate reduction in price. Therefore, the benefit of ITC is to be passed on to each recipient or to each flat buyers of the project. Therefore, the scope of investigation covers all other recipients in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 171(1) of the CGST Act, 2017. Therefore, in this case also it is clear that since the Phase II of the Project Angan was launched in post-GST regime for which the Respondent obtained separate RERA Registration Certificate in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence the same is also not applicable in the case of Respondent's project. e. Darshan Joshi (supra). In this case also, during investigation it was observed that the entire project 'Lodha Primo' was launched in post-GST Regime for which RERA Registration Certificate was also obtained by the Respondent in post-GST regime Accordingly a Nil profiteering Report was submitted by the DGAP against the Respondent which was upheld by the NAA on the grounds mentioned in Para 15 of the aforesaid order and therefore vide Para 17 of the Order, the NAA agreed with the findings of the DGAP. Hence, in this case also since the project was launched in post-GST regime for which the Respondent obtained the RERA Registration Certificate in post-GST regime only this case is not applicable to the Respondent's project as Tower-10 of the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtains to the sold units only in the project whereas the total ITC availed pertains to the entire project to the entire project. The ratio of the ITC to the taxable turnover is computed to bring in picture the buyers from whom demands were raised or advance were received by the Respondent so that the additional benefit of ITC attributed to buyers could be commensurately passed on to such eligible buyers. Therefore, to determine the actual ITC attributable to the sold units, the proportionate turnover is considered. Hence, the methodology on the basis of ratio of ITC to the turnover of pre-GST regime with post-GST, adopted by the DGAP is correct and just triable under the above provisions of section 171 of the CGST Act, 2017 and the methodology bas been approved by this Authority in other similar cases. IV. The Respondent has contended DGAP has been comparing the incomparable. The Respondent claimed that comparing ITC, of two periods cannot be the manner to identify the benefits of ITC, The Authority finds that, the ITC to Turnover ratio comparison is more relevant method to arrive at the correct profiteered amount. The cost of material in the subject case is immaterial as the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining to the passing on the benefit of ITC On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post-GST period, hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to june-2017) was 1.61% and during the post-GST period (July-2017 to October-2020), it was 9.88% for the project Laxmi Apartment's . This confirm that, post-GST the Respondent has been benefited from additional ITC to the tune of 8.27% [9.88% (-) 1.61%] of his turnover for the said project and the same was required to be passed on to the customer/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,33,70,091/- (which includes an amount of Rs. 57,557/- in relation to Applicant No 1) for the project Laxmi Apartment , the details of which are mentioned in Table - B above. 11. Hence, the Authority f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of ITC as determined by the Authority as per the Annexure A of this Order be passed on along with interest @18% to cach homebuyer/recipient/customer, if not already passed on. In this regard an advertisement may also be published in a minimum of two local Newspaper/vernacular press in Hindi/English/local language with the details i.e. Name of the builder (Respondent) M/s Parcena Infrastructure Pvt. Ltd., Project Laxmi Apartment Location Gurugram. Haryana and amount of profiteering Rs. 6,33,70,091/- so that the Applicant along with Non-Applicants Homebuyer/recipients/customers can claim the benefit of ITC which has not been passed on to them. Homebuyer/recipients/customers only also be that this detailed NAA Order is available on Authority's website www.nna.gov.in. Contact details of concerned jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 16. Further, this Authority as per rule 136 of the CGST Rules 2017 directs the concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this order to the Authority and the DGAP within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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